BellRing Brands(BRBR)2023-02-07 17:14Financial Data and Key Metrics Changes - The company reported net sales of $363 million for Q1 2023, an 18% increase compared to the prior year, with adjusted EBITDA rising 42% to $85 million, resulting in adjusted EBITDA margins of 23.4% [20][63] - Gross profit increased by 34% to $122 million, with gross margins improving by 350 basis points to 33.6% [64] - The company expects high teens net sales percentage growth for Q2 2023 compared to the prior year, with adjusted EBITDA dollars anticipated to grow significantly [65] Business Line Data and Key Metrics Changes - Premier Protein net sales grew 23%, driven by an 18% increase in average selling prices and a 5% increase in volumes [38] - Dymatize saw consumption dollars increase by 30% across tracked and untracked channels, with strong double-digit growth in all key channels [23] - The Sports Nutrition segment is performing well, particularly in the club channel, which has growth rates exceeding 20% [22] Market Data and Key Metrics Changes - Premier Protein consumption returned to growth, increasing by 15% in Q1, with a further 17% growth noted in January [22] - Market share for Premier Protein has stabilized at 18% over the past year, despite reduced SKUs and limited promotional activities [22] - Dymatize's market share, TDPs, and ACV reached all-time highs, reflecting strong performance in mainstream accounts [23] Company Strategy and Development Direction - The company is focused on organic growth, with a high bar for M&A, and is considering share buybacks versus deleveraging as capital allocation options [14] - Plans for capacity expansion are on track, with annual production expected to grow in low double digits for fiscal 2023, and an incremental capacity increase of over 20% anticipated for 2024 [21] - The company aims to reintroduce its full range of Premier Protein shake flavors and restart marketing and promotions later in the year [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth prospects, citing strong Q1 results and a robust innovation pipeline [40] - The competitive environment remains stable, with some smaller brands gaining traction due to capacity constraints among larger players [29] - Management expects to see a mix of volume and pricing benefits in the second half of the year, with production coming online and promotional activities resuming [125] Other Important Information - The company generated $36 million in cash flow from operations in Q1 2023, with expectations for stronger cash flow in the second half of the fiscal year [39] - The relationship with Post Holdings has changed, with Post completely exiting its ownership of BellRing, although they will continue to provide services through a master services agreement [40] Q&A Session Summary Question: Can you provide details on the strong results in feed mass? - Management indicated that improved in-stock rates and alleviated capacity constraints contributed to the strong results [1] Question: What metrics are needed to move products from in-aisle to end cap displays? - Management did not provide specific metrics but acknowledged the importance of visibility in driving sales [2] Question: Can you clarify the 20% incremental capacity mentioned for 2024? - Management confirmed that the 20% refers to volume capacity, not revenue [4] Question: How should margins be modeled going forward? - Management suggested that mid-30s gross margins are achievable, but structural costs and funding growth should be considered [4] Question: What is the outlook for marketing and promotional spending? - Management expects marketing spending to increase in Q2, with a focus on non-shake items initially [28] Question: How is the competitive environment shaping up? - Management noted that while smaller brands are gaining TDPs, larger brands are expected to regain shelf space as capacity constraints ease [29] Question: What is the status of e-commerce performance? - E-commerce for Premier was down due to supply constraints, but management is working to resolve these issues [52] Question: What are the expectations for Dymatize's growth? - Management expressed optimism about Dymatize's performance, noting strong consumption growth despite shipment timing issues [102]